Posted by Glenn(okla) on January 02, 2003 at 16:55:44:
I was overlooking the 3%/1% aspect. Yes it has good and bad…the part where the government is “endorsing” lease options is good…however I see your point about it being competition.
Like everything else…wait and see…
Freddie Mac in the Lease Purchase biz - Posted by Marc
Posted by Marc on January 01, 2003 at 15:26:44:
Wow! The 'gubmint is starting to approve of lease/options and has actually developed the Lease Purchase Plus program…
See: http://www.freddiemac.com/sell/expmkts/lease-purch.html
Freddie Mac’s Lease Purchase Plus: A Unique Opportunity for Low- and Moderate-income Families to Become Homeowners
In response to the growing need for new ways to expand homeownership opportunities to underserved communities, Freddie Mac is pleased to offer Lease Purchase Plus. This new approach to lease-to-own helps low-and moderate-income homebuyers by eliminating the need for a large down payment and allowing them to use the lease period to establish or even re-establish their credit reputation.
Owning a home just became easier for households that lack a traditional credit record, have impaired credit and/or lack cash for the down payment or closing costs.
Through Freddie Mac’s Lease Purchase Plus, prospective homebuyers, called lease-purchasers, select a home and a local housing finance agency or non-profit corporation buys the home on their behalf. The agency serves as the initial owner, mortgagor and property manager for the lease period of approximately three years. At the beginning of the lease, the lease-purchaser pays an administrative fee to the agency (typically one percent) and the first month’s lease payment.
During the lease-period, the agency works with the lease-purchaser to ensure they are ready to assume the loan at the end of the lease period. This assistance includes participation in homebuyer education and financial and debt management counseling.
After demonstrating the ability to make timely lease payments to the agency, the lease-purchaser purchases the home by assuming the unpaid principal balance of the mortgage. The down payment may be granted from the agency at assumption, providing a no-down-payment mortgage. At assumption, the lease-purchaser also takes advantage of the equity build-up that occurred during the lease period.
Key Features
No down payment required
Opportunity to establish or restore credit
Excellent alternative for families with credit challenges
Families can move into a home with no waiting period
Lease term 38 months
Benefits
Individuals or families with adequate income to support a mortgage payment can move into a home of their choice immediately rather than wait until cash or credit issues are resolved
No down payment from the participating household is required, either at the time the individual or family moves in or at the time the loan is assumed. The down payment may be granted from the agency.
Equity will accrue for the participating household from the inception of the lease period · Individuals or families can establish credit or restore a blemished credit record during the lease-purchase period
Provides financial benefit of low-cost Freddie Mac conventional mortgage financing to lease-purchasers who might have faced more costly financing choices if they were purchasing the home outright
Local housing agencies can sponsor a new approach to mortgage finance which does not require local or federal housing subsidies (e.g. HOME or CDBG)
Through Lease Purchase Plus, lenders are able to retain customers who would not normally qualify for a loan due to impaired credit or insufficient cash
Homebuilders and real-estate professionals can access a larger pool of prospective clients
Program Requirements
Single-family purchase transactions to 97%/100% LTV/TLTV
Up to 7.5% down payment, closing and financing costs may be advanced by the seller/servicer. Prepaids and escrows are subject to repayment from a portion of the proceeds of the lease revenue pass-through obligation
Initial borrower must be an approved, non-individual, investor-owner borrower (nonprofit or government agency)
Six months principal, interest, taxes and insurance (PITI) reserves waived on investment property mortgage based on the reserve accounts and insurance as a substitute
Lease term 38 months
One-time assumability of mortgage within lease period, subject to minimum time based on credit eligibility
For more information, download the fact sheet:
http://www.freddiemac.com/sell/factsheets/pdf/lease-purch.pdf
Confused here… - Posted by Glenn(okla)
Posted by Glenn(okla) on January 02, 2003 at 13:22:14:
does this mean that Freddie Mac will own the homes, then LP them to TB’ers?
The article referred to “non profit corportations”
what stops the investor from forming a “non profit corporation” then paying himself a nice salary as a result…with FM backing him?
I guess the article left lots of questions in my mind
Re: Freddie Mac in the Lease Purchase biz - Posted by Crickett (Seattle)
Posted by Crickett (Seattle) on January 01, 2003 at 22:47:31:
For more information, download the fact sheet:
http://www.freddiemac.com/sell/factsheets/pdf/lease-purch.pdf
This link doesn’t work for me.
Crickett
Hate to see this happen! - Posted by Bill Taylor
Posted by Bill Taylor on January 01, 2003 at 21:07:19:
Just what we need is the govt. competing with us. No down payments! Business is enough of a challenge without having to give your homes away with no option consideration. I use to think the govt offereing us section 8 was good but then they got into buying homes and giving them out to the poor to rent. Then the govt. came in and paid their rent. Real good competition. Oh well just need to try another angle.
Re: Confused here… - Posted by Marc2
Posted by Marc2 on January 02, 2003 at 13:36:19:
What it says is, your local public Housing Authority or low-income-housing-advocacy-group buys the house on a relatively conventional mortgage, putting 3% down. They lease it to the tenant for the amount of the mortgage payment + taxes/insurance, in return for a 1% admin. fee and the first month’s rent. At the end of 39 mos. the tenant can assume the mortgage…whether the tenant has to pay back the 3% down, they don’t quite say. If they do have to pay it back, I would suggest that what is most likely is that the tenant will refi in order to take advantage of appreciation, then pay the 3% from the proceeds.
Yes, the government is competing with us, but if your LOCAL housing authority isn’t participating in the Lease Purchase Plus program by committing to put the 3% down and buy the property (plus manage it as a landlord), then the program isn’t happening in your area. Mine isn’t participating.
What I see this HELPING with is putting a stamp of legitimacy on lease/options done by us private parties.
No, you could not form a non-profit corporation and participate as you describe, since it will likely have to be a public housing authority to be approved for the program. And, why would you want to put 3% down for your tenants, when they only have to pay 1% up-front?
Marc2
Re: Freddie Mac in the Lease Purchase biz - Posted by Marc2
Posted by Marc2 on January 02, 2003 at 11:33:18:
To view the file (and most other government documents), download the free Adobe Acrobat Reader software from:
http://www.adobe.com/products/acrobat/alternate.html#505enu
It’s a 10MB file, so if you’re on dial-up Internet service (as opposed to DSL or cable), you’ll need to get yourself a cup of coffee while it downloads.
You need Acrobat software for that file (nt) - Posted by ken in sc
Posted by ken in sc on January 02, 2003 at 07:11:28:
nt
I see tremendous opportunity! - Posted by osirus
Posted by osirus on January 03, 2003 at 01:43:53:
“”““Just what we need is the govt. competing with us. No down payments! Business is enough of a challenge without having to give your homes away with no option consideration. I use to think the govt offereing us section 8 was good but then they got into buying homes and giving them out to the poor to rent. Then the govt. came in and paid their rent. Real good competition. Oh well just need to try another angle.””"
This could be a windfall for the investor. Remember that the government has to buy the homes first. Why not position yourself as their home supplier. You would cashed out now ,at FMV instead of waiting for the TB to cash you out months down they road.
Do not forget that this is the government we are talking about here! This means rules, regulations, procedure and overall bureaucracy. Your competitive advantage, as a savvy real estate investor, is that you can instantly adapt by choosing to do so. For example, include the following when advertising a property for LO “Landlord includes , FREE 6 months basic cable, FREE remote control TV, FREE DVD player, FREE $50 video rentals, FREE dinner for two at a 5 star restaurant” ?etc. I estimate that all of these enticements would cost under $900 dollars. However, the perception is that you are offering TB?s an unique opportunity. The beauty is that you pay for all this using the TB?s option consideration. Plus, you can offer to owner financing the property if the TB can not get financing at the end of their lease option agreement. Let me see the government offer that!
3 There is non profit organization that rehabs and builds new homes, in my city, using donations and government grants. This has not stopped investors from successfully rehabbing in my city, as for as I know. I suspect they same will be true for government LP programs.